ZURICH • There is a “strong case” for authorities to rein in digital currencies because of their links to the established financial system, Bank for International Settlements GM Agustin Carstens said.
In his first major public speech as head of the Basel, Switzerland-based institution, Carstens argued that central banks — along with finance ministries, tax offices and financial market regulators — should police the “digital frontier”. He said they must ensure a level playing field and functioning payment systems, and safeguard the “real value” of money.
“Bitcoin is not functional as a means of payment, but it relies on the oxygen provided by the connection to standard means of payments and trading apps that link users to conventional bank accounts,” Carstens said in Frankfurt yesterday. “If the only ‘business case’ is use for illicit or illegal transactions, central banks cannot allow such tokens to rely on much of the same institutional infrastructure that serves the overall financial system and freeload on the trust that it provides.”
While noting that many people don’t consider them to be a systemic threat because of their still-niche role, he warned that could change quickly.
“If authorities do not act preemptively, cryptocurrencies could become more interconnected with the main financial system and become a threat,” he said. “Most importantly, the meteoric rise of cryptocurrencies should not make us forget the important role central banks play as stewards of public trust. Private digital tokens masquerading as currencies must not subvert this trust.”